USS: What do ‘covenant protection measures’ mean?
An explainer on what the new covenant protection measures proposed by USS mean for universities and staff
Pensions
The Pensions Office is responsible for administering and providing information on the pension schemes that are operating at the University.
Enquiries about your pension can be made by emailing the Pension Office on pensions@abdn.ac.uk, or by calling +44 (0) 1224 272289
Related Videos
- Pensions scheme tax allowances
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Changes to lifetime and annual allowances
Changes to the lifetime and annual allowances have been confirmed by HM Revenue & Customs.
Lifetime allowance
The government announced that from 6 April 2023 the lifetime allowance charge will be removed. The lifetime allowance will be fully abolished from the 2024 to 2025 tax year, through a future Finance Bill.
Annual Allowance
Members are restricted in the amount of tax preferential pension benefits that can be build up in a year by the annual allowance. From 6 April 2023 the annual allowance for tax relief on pension savings in a registered pension scheme will increase from £40,000 to £60,000.
Should your benefits built up over the year exceed this allowance, then you will be re-assessed for income tax (the excess will be added to your taxable pay for the year) unless you have unused allowance from the three prior years.
There are two changes to this allowance as follows:-
- Transitional arrangements are in place for the 2015/16 year to align scheme practice with tax years.
- From April 2023, members with taxable income in excess of £260,000 will need to consider the new tapering rules, which could mean your annual allowance is less, possibly as low as £10,000 a year.
Money Purchase Allowance
If you’re 55 or over, you can start taking from any defined contribution pot you may have flexibly.
HMRC introduced a limit to stop these savings from being taken out and then repaid into another pension scheme for extra tax relief. This limit is known as the Money Purchase Annual Allowance (MPAA).
Once you trigger the MPAA, it’ll apply that tax year – and all future tax years.
The MPAA limits how much you can pay into a defined contribution arrangement before you need to pay tax. The limit is currently £10,000 per year.
If you and your employer make contributions that go over the limit, you’ll need to pay additional income tax on the amount you’ve gone over by. This cancels out the tax relief which you’d received automatically.
- Automatic Enrolment
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A new law means that every employer must automatically enrol workers into a workplace pension scheme. This is called ‘automatic enrolment’. The date for the University Aberdeen to start to apply automatic enrolment was 1 May 2013. The University held information sessions for all staff in April. View the presentation slides.
1 – What is pension automatic enrolment all about? Automatic enrolment is intended to get more people saving into a pension scheme to provide for their retirement. At present around half of all employees in the UK are not members of any occupational pension scheme and are not making any provision for their retirement. With life expectancy continuing to increase, the Government is concerned that many people will not have enough income to support their retirement years. Further information is available from www.direct.gov.uk/workplacepension.
The UK is not the first country to introduce a scheme of this kind; similar arrangements operate in a number of countries including Norway and New Zealand.
Why is saving for my future important?
Your future may be longer than you think! Life expectancy is increasing rapidly; it is about 8 years greater now than it was just 40 years ago. The increase is showing no signs of slowing down. While the state social security system will provide enough to survive on, it is clear that a good quality of life requires more than will be available from the state. You can provide this either by continuing to work, or by saving now to have funds to enjoy in the future. - A pension is a tax-efficient way of saving that also receives contributions from your employer.
When is it happening?
Automatic Enrolment is being applied to employers at different times, depending on their size. The largest employers had to introduce automatic enrolment from 1st October 2012. It will apply to this University from 1st May 2013.
Who will it affect?
Potentially it affects any worker who meets all of the following criteria:
- Age - if you are 22 or over but not older than the State Pension Age
- Earnings - if your earnings in any month exceed £833
- You ordinarily work in the UK
- And you are not a contributing member of one of the pension schemes supported by the University.
The pension schemes supported by the University are:
- USS- for academics and staff on grades 5 to 9 and equivalent
- UASLAS- for support staff on grades 1 to 4 and equivalent
- STSS– for those existing STSS members of staff who joined the University from Northern College only
- LGPS- for those existing LGPS members of staff who joined the University from Northern College only
- NHS Scotland - for certain clinical academics who exercised their option to remain in this scheme on appointment to the University.
Once you have been automatically enrolled, you will have the option to opt-out of the pension scheme and receive a refund of any contributions paid. There is a time limit of one month from your auto-enrolled date in which to do this so that you will never have become an active member of the pension scheme. You will have to contact your pension scheme to make this happen; the University is prohibited, by law, from helping you to opt-out. The University will inform you when you are automatically enrolled of you right to opt out and how to do it.
You will still have the right to withdraw from the pension scheme at any time but whether you will be entitled to a refund or not will depend on the pension scheme rules and how long you have been a member. You can contact the pension office on 01224 272289 or email pensions@abdn.ac.uk for more information on your individual circumstances.
2 - I am a member of the USS/UASLAS/NHS/STSS/LGPS If you are an active member of one of these schemes and paying contributions then you will not be affected by these changes and need do nothing. If you cease being a contributing member of the scheme while continuing in employment, you will be assessed for automatic enrolment. 3 - I am not an active member of any of the above pension schemes If you meet the criteria set out below, and are not an active member of any of our pension schemes, the University is required to automatically enrol you into a suitable pension scheme.
The criteria for automatic enrolment are:
- Age - if you are 22 or over but not older than the State Pension Age
- Earnings - if your earnings in any month exceed £833
- You ordinarily work in the UK
You will be automatically enrolled into UASLAS if you are on Grades 1 to 4 and USS if you are on Grades 5 -9.
If you are receiving a USS pension you will be automatically enrolled into USS (career revalued benefits section). You will receive a notice from the University telling you that you have been automatically enrolled and advising you of your options, including the right to opt out. This will normally be sent as an email - so it is important that you provide us with an email address and let us know if it changes (contact your HR team with any changes in your contact details).
Once you have been automatically enrolled, you will have an option to opt-out of the pension scheme and receive a refund of any contributions paid. There is a time limit of one month in which to do this, and you will have to contact your pension scheme to make this happen; the University is prohibited, by law, from helping you to opt-out.
4 - I am only on a temporary, short-term contract The duration of the contract is immaterial - assessment for automatic enrolment is carried out each month, on the earnings that you receive in that month. If you are not an active member of any of the University’s schemes with respect to the work that you are doing, you will be assessed for automatic enrolment as set out in section above. 5 - I am a casual/contingent worker, or paid by a Fee form The automatic enrolment regulations apply to you if you meet the criteria:
- Age - if you are 22 or over but not older than the State Pension Age
- Earnings - if your earnings in any month exceed £833
- You ordinarily work in the UK
Any payment that you receive in any one month that exceeds the threshold of £833 will trigger automatic enrolment. This will apply even if you are already a member of a pension scheme via another employer, or have been automatically enrolled by another employer. If you are not an active member of the University’s schemes in respect of the work that you are doing, you will be assessed for automatic enrolment as set out in section above.
6 - I am already in receipt of a pension The automatic enrolment regulations continue to apply. If you meet the criteria;
- Age - if you are 22 or over but not older than the State Pension Age
- Earnings - if your earnings in any month exceed £833
- You ordinarily work in the UK
You will be automatically enrolled into a suitable pension scheme.
7 - I am a new recruit Your letter of appointment and conditions of service will tell you which pension scheme you may join, and which scheme you will be automatically enrolled into if you do nothing, subject to you meeting the automatic enrolment criteria;
- Age - if you are 22 or over but not older than the State Pension Age
- Earnings - if your earnings in any month exceed £833
- You ordinarily work in the UK
8 - I have been automatically enrolled by another employer It does not matter if you are a member of another pension scheme through another employer, or if you have been automatically enrolled by another employer. The automatic enrolment regulations require each employer to assess its workers, and to apply automatic enrolment to them if they meet the criteria for that employer. The criteria are;
- Age - if you are 22 or over but not older than the State Pension Age
- Earnings - if your earnings in any month exceed £833
- You ordinarily work in the UK
9 - I want to opt out You can opt out after you have been enrolled automatically, but not before.
The opting out process is handled by the pension scheme, which will provide the necessary form. If your completed opt-out form is received before the end of the one month “opt out period”, which on first day of employment, you will be removed from the pension scheme.
Any payments you have already made will be refunded, and you will not have become an active member of the scheme on this occasion.
If your opt-out form is received before the payroll submission deadline for the month in which you take up employment then no payments will be deducted at all.
The form can be obtained as per below:
UASLAS
To opt out, please download an Opt-Out Form or telephone UASLAS on 0345 268 0288 or to have one posted to you.
USS
To opt out, please download a Notice to Opt Out from found on the USS member's website or telephone USS on 0151 227 4711 to have one posted to you.
Once you have completed it, send it to
Pensions Office,
Room 54,
University Office,
King’s College,
Aberdeen,
AB24 3FX
- University Superannuation Scheme (USS)
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Overview When you take up your academic, research or related post you will be enrolled automatically into the USS pension scheme, assuming your employment qualifies you. But you do, of course, have the right to opt-out of joining USS. There is no alternative pension scheme (with the exception of certain groups of Clinical staff transferring from NHS employment - contact the Pension Office for more information) so if you choose to opt out of USS you will not be saving towards your retirement.
If you have just become a new employee or are considering taking up a post with the University of Aberdeen please read this leaflet for more information on the benefits of being a member of USS and what to expect next.
Before deciding against being a member of USS, please consider what you’re missing out on:
- A significant contribution from your employer – from 1 January 2024 your employer will pay a monthly contribution equal to 14.5% of your salary, while you will pay 6.1%. The cost from your take-home pay is a lot less than this, as you get tax relief on your contributions and you also pay a lower rate of National Insurance if you salary sacrifice your pension contributions.
- A regular income when you retire plus a tax-free lump sum – you build up pension benefits, based on a formula, of a pension and an additional tax-free lump sum.
- Immediate life cover for your dependants – a lump sum of three times your annual salary, plus a pension for life for your spouse/registered civil partner/partner, plus financial support for eligible children.
- Incapacity cover – subject to satisfying USS eligibility criteria, a pension for life and tax-free cash would be provided if you can’t go on working because of partial or total incapacity as a result of long-term illness or injury.
- Pension increases – valuable increases to your pension when you receive it.
- Pensions Plus (salary sacrifice) scheme booklet
USS Web Site
Information on the USS website includes forms, AVC and retirement modellers.
Annual Reports Annual Reports
Tax Implications Changes to pension taxation and information for USS members
The government announced changes to the taxation of pensions in its 2015 summer budget.
These changes, and in particular the repeated lowering of the lifetime and annual allowances seen in recent years, means that it is not only the very highest of earners who need to consider their pension arrangements.
If you are likely to be subject to a pensions tax charge we strongly recommend you seek independent financial advice before making any changes to your pension saving arrangements. You do, of course, need to consider your pension provision holistically, and therefore if you have non-USS pension benefits they should be part of your overall pensions and tax planning.
Should you feel you need more information you are encouraged to read the dedicated Pension Tax area on the USS member's website - USS website.
- An introduction to the changes
- Enhanced opt out and Voluntary salary cap * Deadline for 2023/24.
Completed Voluntary Salary Cap (VSC) election forms must be emailed to the University Pension Office no later than 12 noon 30 March 2023. VSC election forms can be obtained from the Pension Office by emailing pensions@abdn.ac.uk
Information to be included in the USS annual allowance statements
With the introduction of changes to the system of taxation for pensions from April 2011, USS must now provide any member who exceeds the Annual Allowance (AA) with a new form of pension savings statement.
The statements will include the following information:
- The AA accrual in respect of USS benefits for the year
- The AA accrual in respect of the prior three PIP periods
- Details of payments made to the USS Money Purchase AVC for each year, if applicable
- The statutory AA value for each period will also be included
Individuals are entitled to ‘carry-forward’ unused allowances from a previous year to reduce or eliminate a tax charge in a specific year, however the exact way that carry-forward is used is a personal matter for individuals and therefore the statement/s will not calculate the balance of carry-forward allowances.
Included with the statement will be a factsheet explaining why the statement has been generated and what the next steps should be.
Member responsibilities
The burden of responsibility to correctly calculate an AA charge and report it to the Revenue lies with the member. These are essentially personal taxation issues and for this reason USS and The University of Aberdeen is unable to provide calculations of the taxable amounts (i.e. the amount of accrual, after carry-forward, that is subject to a tax charge).
The statements will provide information in relation to USS membership only, and therefore the member will have to account for any other pension provision that he or she may have.
Overall it is the member’s responsibility to:
- Check whether he/she has breached the AA limit after accounting for any carry-forward allowances;
- Take account of any other pension savings amounts earned outside of USS;
- Inform the Revenue via the self-assessment tax return (the relevant form is the “SA101 (Additional information)” form) of the amount by which his/her pension savings exceed the AA value, and
- On the same form, provide information on AA tax payable by the pension scheme
Scheme Pays
Members who have a tax charge as a result of exceeding the AA can require the trustee company to pay the charge on their behalf but only if:
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USS benefit accrual exceeds the standard AA; and/or you are subject to the new Tapered AA and the value of your benefits built up over a tax year for AA purposes are greater than your Tapered AA
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The total AA tax charge is £1,000 or more, and
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The tax charge is in respect of USS benefits only
Scheme Pays deductions will now, where available, be made from members’ USS Investment Builder funds in the first instance.
However if a member does not have any/enough USS Investment Builder funds to pay the charge, then a deduction will be made to their USS Retirement Income Builder benefits.
Useful documents and information
The Scheme Pays information can be found on the tax section of the USS website.
USS have launched an Annual Allowance (AA) modeller, which will help you estimate how much of your AA you've already used during the current tax year.
The Scheme Pays Modeller is now available for members. Please note: the modeller will show deductions to be made from USS Retirement Income Builder funds as if there are no USS Investment Builder funds available. If the member has USS Investment Builder funds available, then the charge will be taken from their USS Investment Builder in the first instance.
Further information on AA and Scheme Pays can be found at:
http://www.hmrc.gov.uk/pensionschemes/aa-ps.htm, in addition to the information available on the USS member’s website and the USS factsheet ‘Limits to tax relief and tax-free benefits.’
- UASLAS
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This scheme is open to staff on Grades 1-4
UASLAS is the University of Aberdeen Superannuation and Life Assurance Scheme. From 1 August 2011 the scheme has operated on a Career Average Revalued Earnings (CARE) basis. All existing members benefits accrued to 31 July 2011 will remain unchanged and all future benefits accrued for existing and new members of the Scheme will be based on CARE.
What is CARE?
- Each year you will earn a block of pension and lump sum based on your Pensionable Salary for the year, which will build up towards your total pension and lump sum.
- From 1 January 2019 you will build up a block of pension equal to 1/100th (3/100ths for the lump sum) of the pensionable salary you earn each year. The pension you have earned between 1 August 2011 and 31 December 2018 will be equal to 1/80th (3/80ths for the lump sum) of your pensionable salary for each year of service up to that date.
- Each block of pension and lump sum will increase by the annual increase in the CPI measure of inflation up to a maximum of 3% per annum for benefits earned after 1 January 2019 and 5% per annum for benefits earned between 1 August 2011 and 31 December 2018, until your date of retirement.
The Scheme also provides a death in service lump sum of 3 times your pensionable salary and also provides spouse's and, at the discretion of the Trustees, dependant's pensions. To assist the Trustees, it is important that you complete and update beneficiary/dependant forms as necessary.
- STSS and NHS
- Strathclyde Pension Fund (LGPS)
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The Local Government Pension Scheme (LGPS) administered by the Strathclyde Pension Fund Office (SFPO) is not open to new members of staff. Membership of this scheme is restricted to those employees who were already a member of the scheme when Northern College merged with the University of Aberdeen. Further information about the scheme, forms and guides can be found on the SPFO website.
From 1st April 2015
The Local Government Pension Scheme in Scotland is changing. LGPS 2015 website provides a wealth of information for members about the changes to the Local Government Pension Scheme (LGPS) (Scotland) on 1 April 2015.
In summary LGPS 2015:
- changes the LGPS from a final salary to a career average scheme
- links normal retirement age to a member's individual state pension age for benefits built up from 1 April 2015
- protects benefits built up to the 31 March 2015 and
- offers the same great deal on contributions, life and ill health cover
SPFOnline
SPFOnline will enable you to do the following subject to its Terms and Conditions, Privacy Policy and Statement and Cookie Policy:
- Amend your contact details
- Check your personal details
- Check the information that University of Aberdeen has provided SPF with
- Estimate your benefits
- Ask SPF for information/calculations
You will need to register to gain access to SPFOnline which can be done via the SPFO website.
- Pension Plus
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Pensions Plus is a way to contribute to either the University of Aberdeen Superannuation and Life Assurance Scheme (UASLAS) or the Universities Superannuation Scheme (USS) that will save National Insurance (NI) and increase your take home pay.
The Pensions Plus scheme was introduced from 1 April 2008. Prior to this employees paid pension contributions into their scheme directly.
Under Pensions Plus employees agree to give up an amount of their contractual gross pay equal to their pensions contribution. In return, the University increase its contributions to cover both the employee and employer elements of the pension contributions.
As a result both the employee and the University pay lower National Insurance contributions.
New members of staff are entered into the Pensions Plus scheme automatically after the first three months of scheme membership, but it is possible for any employee to opt out of Pensions Plus if they wish.
More information on Pensions Plus is available in the Pensions Plus brochure
- Independent Financial Advice
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Some aspects of pensions are complex and members are presented with difficult decisions to make.
The Pensions Office can provide information about the schemes and options available to members, but cannot provide financial advice.
Members who need financial advice are recommended to contact an independent financial adviser.